HopFed Bancorp, Hopkinsville, KY (HFBC)

The Case of the Missing 40% Growth in a Bible Belt Bank

After a few years of hanging onto my hopes for HopFed, I'm afraid the only reason to invest in it today is if you believe management will come to their senses and sell instead of continuing to run the bank into the ground. Given HFBC's still outstanding $18M in TARP, its MOU, deteriorating asset quality, and unfulfilled promises, wouldn't shareholders be better served by the bank selling for even 70% of book value to a company that's capable of earning decent returns? Scarier still, that opportunity may be waning.

Disclosure: As of this posting, I own significant shares of HFBC and may subsequently either dispose of them or purchase more.

Prospective Buyers
Any of these three super-regionals with branches overlapping HFBC's would have a prayer of resurrecting the bank's performance:

BB&T Corp, Winston Salem, NC (BBT)
Regions Financial, Birmingham, AL (RF)
US Bancorp, Minneapolis, MN (USB)
Financial Snapshot
(as of 3/31/2012)

Total assets:
Tangible book value per share:
NPAs to assets:
Price to book:
Market cap:
Dividend yield:
Trailing 12-month return on assets:
Trailing 12-month return on equity:
The Crew
Gilbert Lee, Chairman
John Peck, President and CEO
Billy Duval, Sr VP, Treasurer, and CFO
Red Flags
HFBC isn't meeting the following five of my top criteria for investing in banks:
  • Invest where NPAs are declining. Inexplicably, HFBC's Q1 2012 NPAs rose a steep 30% after three quarters of declines
  • Invest where you can expect above-average returns. HFBC hasn't produced a decent return on the bank's capital for over two years.
  • Invest where insiders are buying. HFBC insiders — led by Chairman Gilbert Lee and Directors Boyd Clark and Harry Dempsey — have been Net Sellers of stock in the open market since HFBC's ill-fated Secondary in 2010.
  • Invest where Management has a strong history of keeping its word. See timeline below of HFBC's performance and questionable commitment to integrity. 
  • Invest where Officer interests are aligned with shareholders'. Since 2008, HFBC CFO Billy Duvall and COO Michael Woolfolk have raised their compensation 47% and 29%, respectively, while producing significant declines in company earnings and share price.

HFBC Performance Timeline

FEB 09
HFBC goes public
OCT 28
Investor presentation shows Book Value $16.98, Dividend Yield 4.75%
FEB 26
President Peck exercises and surrenders 30K shares, netting ~ $50K

MAR 22
Board raises salary of CFO Billy Duval

APR 26
Howe Barnes raises HFBC rating to Buy with $20 price target

MAY 06
HFBC announces MOU with Regulators

MAY 25
HFBC files Registration Statement to sell additional shares

JUN 09
President Peck and CFO Billy Duval predict 40% growth to Howe Barnes investors

JUN 16
HFBC issues 3.33M shares @ $9.00

JUL 26
HFBC releases Q2 EPS of $0.44 claiming “profitability levels are improving”

NOV 01
HFBC releases Q3 EPS of $0.20
JAN 31
HFBC releases Q4 EPS of $0.07, half of analyst estimates

SEP 22
HFBC cuts dividend 75%, from to $0.02 from $0.08
MAY 03
Analyst Ross A. Demmerle, Hilliard Lyons, issues Neutral report for HFBC, citing the bank’s “weak fundamentals and foggy outlook”

JUN 22
Investors are still awaiting the promised 40% growth, or at least a clear and honest explanation for two years of failure to perform


  1. HopFed Bancorp reported another mess tonight. HFBC's loans aren't growing but non performing loans and salaries sure are. Management's poor performance begs for an activist.

  2. maybe they can moe with pbib!